Case Analysis of Yahoo
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Brief Company Background:
Yahoo! is an Internet and media communications company that was created in 1994 by two Stanford Ph.D. students, David Filo and Jerry Yang. The company was built on the fact that it was one of the first search engine providers during the early 90s. Yahoo! became a public company in 1996 and by selling vast amounts of advertising space and making numerous acquisitions, became a dot-com giant by 2000–attracting over 430 million global visitors per month.
By 2001, Yahoo! began to feel the effects of the dot-com bust that occurred shortly after the companys huge success. Yahoo! began losing grip on its advertiser base and the stock plummeted 90 percent in share value. Today it is an Internet giant in decline with very limited growth potential.
Key Issues:
From early on, Yahoo! was able to leverage mainstream advertising to capture customers that had not yet experienced the internet to use their search portal. The major shifting point for Yahoo! was when it planned to expand beyond the search engine–to be transformed from the strictly portal site that it once was to a “Do Everything” site where people would go to gather information on just about anything. Their goal was to increase user visiting time to maximize ad exposure.
The company began to offer non-stop content over the years and acquired companies that allowed them to offer better services for both individual and business users such as e-mail and e-commerce platforms. In the late 90s, Yahoo! had an impressive following abroad, ranking either first or second in nearly every market it entered–even outranking its biggest domestic competitor at that time, AOL.
Yahoo! seemed to be on top of the world until the dot-com market crashed in early 2000–crippling the company to later fall behind Google and other key players. Since 80 percent of Yahoo!s revenue came mainly from online Internet advertisers, the dot-com crash slowly took ate away at Yahoo!s ad revenue. In addition, its stock price took a further hit as shareholder confidence dwindled.
Yahoo! operates in a highly aggressive online advertising industry. As such, it faces heavy competition from other Internet companies, mainly Google. In July 2006, Yahoo!s stock price fell 22 percent due to delays with their revitalized search platform that was intended to deliver more relevant ads to users. This would in turn enable Yahoo! to charge advertisers a higher premium in line with what Google has done.
In addition, Yahoo! began to lose its position in the international arena. A strong international growth effort to promote the Yahoo! brand was needed. Yahoo!s Hollywood entertainment contracts slowly dissolved as companies began to spearhead their own online campaigns and compete with Yahoo! by advertising on their own sites. Although Yahoo! has achieved remarkable brand presence, it has overextended itself and now lags behind its competitors.
Competitive Landscape:
Yahoo! faces fierce competition–it competes with Microsoft, AOL, and Google for advertisers, publishers and users. The company also competes with social media providers such as MySpace.com and Facebook. Yahoo!s competitors are more specialized in certain market segments and have greater brand recognition for their services. Competitors have greater operational resources and financial support after most of them merged with larger media networks–Yahoo! still remains independent to date. Yahoo! competes with International Internet service providers (ISPs) that offer similar search and communication services.
Sources of Brand Equity:
Customers determine the amount of brand equity a brand receives based on the particular level of awareness and familiarity they have with them (Keller, 2008). Yahoo!s early marketing program enabled the company to have a highly equitable brand and a positive brand image. For brands to be successful, marketers need to create strong, favorable, and unique brand associations in the minds of consumers. These associations then cause customers to react more favorably toward their brand over another, adding to brand equity.
Yahoo!s key source of brand equity is its massive brand awareness. Brand awareness affects consumers ability to recognize and recall the brand from memory. Since Yahoo! is an online brand, creating brand recall is critical because consumers have to actively think of the brand before they seek it out. Increasing familiarity of the brand through repeated marketing efforts is important to make the brand recognizable among consumers. In building brand equity, it is also important to develop a marketing program that communicates appropriate linkages between the brand and the product and or service category. Building brand awareness is often the first step in building brand equity and is critical for any new business; Yahoo! excelled at it.
Yahoo! was able to leverage its unique name and secondary brand associations from partnering with early web browser, Netscape, which hosted Yahoo! as the default search provider. This significantly raised consumer awareness for Yahoo! as Netscape was the first web browser available to the public at that time. This gave Yahoo! the attention it needed to attract investors and shortly after was able to raise the capital it needed to take off.
Yahoo! was able to persuade customers to associate Yahoo! with being fun, exciting and edgy along with communicating its ease of use and friendly personality. This was important as the Internet was relatively new to most people at that time and some hesitated to adopt it. Yahoo!s ability to get customers emotionally attached to the brand was a critical step in getting search traffic.
Yahoo!s source of brand equity changed over time. Originally, the company was known for being a powerful search engine. Yahoo! changed their brand image in order to move from search to content. Unfortunately for Yahoo!, Internet search had greater long term growth than content ever would. Yahoo!s strategy to become synonymous with content gave competitors like Google an opportunity to dominate the search market.
Yahoo! still holds the award for having the highest amount of online awareness among web service sites. This was fueled from the early Black Rocket marketing efforts and other marketing initiatives they engaged in throughout the years
2. Black Rocket Marketing Program:
Yahoo!s marketing program contributed to the companys brand building efforts that made Yahoo! one of the